Iceland crafts banking plan

Iceland unveiled plans to get its collapsed banking system back on its feet, including a $2 billion recapitalization and the sale of significant equity stakes to creditors.

The Finance Ministry said the deal is a significant step on the road to recovery for the North Atlantic nation, which became one of the earliest and hardest-hit casualties of the global financial crisis, thanks to a pile of debt amassed during years of light regulation.

Iceland's three principal banks -- Kaupthing, Glitnir and Landsbanki -- failed within a week in October, owing around $60 billion to foreign lenders. Restructuring the sector and repaying creditors is seen by analysts as key to reviving the economy.

The plan comes just days after Iceland's parliament voted by a narrow margin to apply for membership in the European Union.